TSMC Sales Surge. It Might Be an Even Bigger AI Chip Winner than Nvidia.

Taiwan Semiconductor dominates the high-end chip manufacturing sector. (An Rong Xu/Bloomberg)

Nvidia is the artificial-intelligence chip superstar but Taiwan Semiconductor Manufacturing deserves a mention too. The Taiwanese chip manufacturer’s sales are booming as it rides a wave of demand for AI processors.

Taiwan Semiconductor, known as TSMC, recorded second-quarter sales of 933.8 billion New Taiwan dollars, or $31.93 billion, based on its latest monthly report on Thursday. That was ahead of market expectations of NT$924.05 billion, according to a FactSet poll of estimates.

Sales were up 39% from the same period last year, a slight slowdown from 42% growth in its first quarter. TSMC didn’t give any detail on the makeup of sales—that will have to wait until its earnings report on July 17—but the driver was likely AI chips.

American depositary receipts of TSMC were down 1.6% in morning trading. There could be some profit taking in the stock after a 53% gain in the past three months. That is just ahead of the 51% gain recorded by Nvidia, which is a major customer of TSMC, over the same period.

TSMC’s growth doesn’t quite match Nvidia’s 69% revenue surge in its latest quarter. However, while Nvidia has to work hard to maintain its lead over a raft of competitors, TSMC dominates high-end chip manufacturing and there is little to suggest it will face much competitive threat in the next few years. Intel continues to struggle to persuade AI semiconductor companies to use its facilities.

TSMC has previously said it expects revenue from AI-related chips to double in 2025 and grow at a mid-40% annual growth rate for the next five years.

TSMC also makes the core processors inside Apple iPhones, Qualcomm mobile chipsets, and processors made by Advanced Micro Devices. While that leaves it exposed to cyclical changes in demand for smartphones and other devices, relative to Nvidia, it also gives it a more diversified revenue base.

“While AI continues to dominate the narrative, a reemerging mainstream alongside secular AI growth could spark a semiconductor super-cycle of a different kind,” wrote analysts at semiconductor research firm Chips & Wafers in a recent research note.

The only fly in the ointment could be President Donald Trump’s tariff policy. While chips have been exempt from tariffs until now, Trump said Tuesday that he would soon announce levies on imported semiconductors, though he didn’t specify a level or date.

It isn’t clear if TSMC would receive a waiver on such levies despite pledging a total of $165 billion in U.S. investment. The company might benefit from a tariff rule that says if at least 20% of an imported item’s value is “produced or transformed in the U.S.,” the tariffs will be levied on the non-U. S. content.

Write to Adam Clark at adam.clark@barrons.com